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RPower against UMPP bid curb

business Updated: Dec 13, 2009 21:15 IST
Anupama Airy
Anil Ambani-controlled Reliance Power

The Anil Ambani-controlled Reliance Power has opposed a restriction the government has proposed to impose on the number of ultra mega power projects (UMPP) to be awarded to any single developer.

“Any restriction on competition will lead to higher tariffs and would adversely impact millions of power consumers,” said J.P. Chalasani, CEO, Reliance Power, said in a recent letter to the minister of coal, Sriprakash Jaiswal.

The Empowered Group of Ministers (EGoM) on UMPPs is considering a curb on the number of UMPPs that can be awarded to a single entity in future bids for UMPPs that typically enjoy concessional terms from the government on equipment purchase and other conditions.

Of the four UMPPs awarded so far, Reliance Power has already bagged three UMPPs of 4,000 mega watts each at Sasan (Madhya Pradesh), Krishnapatnam (Andhra Pradesh) and Tilaiya (Jharkhand).

If the proposed restriction to limit the award of projects to a single entity is imposed, Reliance Power may not be able to participate in future bids. The government is planning to invite bids for setting up six more UMPPs in the country.

A senior Power Ministry official said the government’s intention to impose such restrictions is to give other developers a
chance to participate in the country's power development programme.

Moreover, as every UMPP involves a financial commitment of Rs 16,000 crore each, it is felt that by awarding more UMPPs to the same developer, the availability of funds to implement the projects also poses a financial challenge for the developer.

However, Reliance Power feels that availability of debt funds are faced by the developers due to "sectoral exposure on lending to power sector" and not due to the "exposure on lending to a business group or a company.” Thus, imposing a limit on UMPPs will not solve the existing financial challenges faced by the power sector, the company has said.

“Such restrictions will be against the provisions of Electricity Act 2003, will increase power tariffs and therefore will impact the interest of power consumers," said Reliance Power in its letter. The 2003 law aims at boosting private investments in the sector.